What is Partnership Firm: 4143615
Partnership business is when two or more person Join together to carry-out a business to achieve their common business goals.
In India, we have a definite law which covers all the aspects of a partnership business, The Indian Partnership Act 1932.
The act defines a partnership as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”
Characteristics for Partnership Firm:
1. Minimum 2 Partners are required for a partnership business
2. The formation based on written agreement & it’s called partnership deed
3. Profit shared as agreed upon through Partnership deed
4. Partners are collectively and individually responsible for liabilities
What is the Difference between Pvt. Ltd and Partnership
| S.NO | FEATURE | PRIVATE LIMITED | Partnership Form |
| 1 | Members | Minimum Number of members that is needed to form a Private Limited Company is 2. But the maximum is 200 | Minimum Number of members that is needed to form a Private Limited Company is 2. But the Indian Partnership Act doesn’t mention about the maximum limit for members. |
| 2 | Liability | The most important feature of a Limited Company is that the Liablity of share holders are limited by their Shares | The partners are Jointly and individually liable. Which it is called as unlimited liablity. |
| 3 | Governing Law | Private Limited Company is Governed by The Companies Act, 2003 | Partnership Firm is governed by Indian Partnership Act, 1932 |
| 4 | Creation | By Incorporating the Company under Companies Act, it can be formed | By simply signing the Partnership Agreement, a Partnership Firm can be formed. Registration is Optional |
| 5 | Name | Name of the Company need to be approved by the ROC. Further there are many regulations for name approval. | No option for getting a name approval in Partnership Firm. |
| 6 | Audit | Mandatory | Not Mandatory |
| 7 | Management | The Board of Directors Manages the Private Limited Company | Partners manages the Partnership Firm |
| 8 | Capital | Minimum 1 lack share capital is required to form a Private Limited Company | Partnership Act does not mention requirement on Capital |
| 9 | Separate Legal Entity | Partnership Firm is not a Separate legal entity | Partnership Firm is a Separate legal Entity |
| 10 | Perpetual Succession | It does not have perpetual succession as this depends upon the will of partners | The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. |
Advantage of Partnership Firm:
- Easy to Form: A partnership firm is easy to form. It can be formed by simply signing a partnership firm in a stamp paper. Registration is just optional.
- Flexibility in operation: Partnership is flexible to operate. At any time the Partners can decide and change the Object, Capital, and even the business activity.
- Sharing the Risk: As the profit any also Loss are shared between all the partners as per the agreement agreed upon. Hence the risk is equally shared upon.
- Credit: As the Partnership firm is of the nature of Unlimited Liability, the debtors can easily process the loan.
- Legal Restrictions: There is no excessive legal restriction as related to Partnership firm. Hence there is a freedom in administration.
- Simple Dissolution process: The Partnership business can be dissolved by simply signing the dissolution deed. Even the partners can quit easily from a Partnership firm by simply signing the reconstitution deed.
Documents required for registering a partnership form
Duly signed partnership deed
Address Proof of all the partners
PAN Card of all the partners
Rental deed for the firm
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